Delta says it's 'playing to win in New York'

Carrier focuses on premium-paying passengers to fatten its bottom line

By

ChristopherHinton

NEW YORK (MarketWatch) -- The world's largest airline, Delta Air Lines Inc., said Tuesday that New York's LaGuardia and John F. Kennedy airports play key roles in growing its corporate-travel business, as the global economy recovers from recession.

Combined, the airports are No. 3 in terms of passenger traffic, just after Atlanta's Hartsfield-Jackson and Chicago's O'Hare airports, according to data from Airports Council International.

It's a significant market for an airline that already has carved out a prime niche in the international and business-travel sector.

By early February, the Atlanta-based carrier expects government approval for a plan to swap operating slots at Reagan National for slots at LaGuardia currently held by US Airways Group
LCC, +0.50%
The airlines also will swap gates at LaGuardia to help further consolidate Delta operations.

If approved, the swap will allow Delta
DAL, +0.84%
to more than double its number of nonstop destinations and add more than a dozen new cities, potentially bringing in more than 2 million additional passengers annually, the airline said.

"With the diverse fleet we have as a result of the merger [with Northwest Airlines], we can fly the right planes in the right markets and strategically align our hubs," said Chief Executive Richard Anderson on a call with analysts. "We are playing to win in New York."

Delta intends to leverage its network and enhance its product line up to help attract "high-value customers" -- namely business travelers who pay a premium to fly at the last minute and in greater comfort, along with having the ability to change itineraries.

Delta began installing flat-bed seats in for its business-elite class in 2008 for certain long-haul aircraft. In addition, the company will also add Wi-Fi networks, on-demand entertainment and chef-inspired menus to reel in people willing to pay more.

On Monday the airline announced it would invest an additional $1 billion over the next three years to upgrade its fleet and improve customer experience, particularly for its BusinessElite, first class and elite-level fliers.

"Our premium travelers tell us that the comfort of a flat bed seat with direct aisle access, a first class experience on regional jets and in-flight entertainment are important factors in their choice of carrier," Anderson said.

Global premium traffic fell 17% in 2009 through November and played a large part in airline losses for the year, according to the International Air Transport Association. In the first six months of the year, premium revenue for the industry fell 30%.

Airlines have said for months that business travel is slowly returning, but a return to 2008 levels this year is not expected.

In addition to fleet upgrades, Delta is also looking to Asia and the transpacific market, where it does not have as much of a presence compared with the transatlantic. To change that, Delta is hoping to tempt cash-strapped Japan Airlines Corp.
JALS
(9205) from its alliance partner, AMR Corp.'s
AMR, -6.74%
American Airlines.

That has not gone according to plan, with JAL and the Japanese government rebuffing Delta's offer of $1 billion in funding in turn for JAL joining its SkyTeam alliance.

"While we are prepared and would be prepared to make an up-front investment in JAL, that's not in the plans at the present time," said Delta President Ed Bastian.

Nonetheless, Delta claims its SkyTeam alliance is the largest between the United States and Asia, helping it to gain access to the fast-growing mainland market.

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